One of the most active Canadian funds this year so far has been BCI, with several high-profile investments and the expansion of its New York and London offices. In addition, the British Columbia fund was one of the top scorers of our GSR scoreboard, with 96%. We had the great pleasure of speaking with Gordon J. Fyfe, CEO & CIO, about BCI’s latest developments.
[GSWF] What makes BCI unique when compared to other Canadian funds?
[BCI] Having worked at three of the Maple 8, I would say we are similar in more ways than we are different. All of us are independent of government with similar mandates and have all built sizeable internal teams to maximize risk-adjusted returns, which is our primary goal. One difference at BCI is that when I got here nine years ago, we had a lot to do (relative to our peers) in terms of growing our exposure to international assets and private markets.
[GSWF] BCI has grown its AuM from CAD 100 bn in 2013 to CAD 233 bn in 2023 – is this only returns or also rising deposits?
[BCI] Mostly via returns. CAD 12 bn has come from the value add that’s created above all the benchmarks. We can only accept clients within the BC public sector, so our growth via new clients has been CAD 20 bn. On the way forward, our growth will come from returns plus our value-add.
[GSWF] In the past eight years, BCI has doubled its weight in private markets from 28% to 50% and reduced its Canadian portfolio from 52% to 29% while increasing in-house management to 83% of total assets. Was this according to plan?
[BCI] When we started our transformation nine years ago, we had three main objectives: (i) expanding our investment teams to manage more of our portfolio in-house; (ii) increasing our exposure to private asset classes, including infrastructure, private equity and credit, and real estate (QuadReal), given our long-term liabilities while reducing our significant weight in Canada; and (iii) strengthening our investment risk, operations and support functions. BCI’s management team’s experience and strong track record are instrumental to the success of our transformation.
[GSWF] Where do you see growth and investment opportunities now, in terms of asset classes and regions?
[BCI] We see opportunities in private credit – there is less competition, higher margins and a better rate structure which are very attractive to BCI (our portfolio is already at 7% under the leadership of Daniel Garant). With the energy transition that is taking place, businesses are transforming their infrastructure and operations to be less carbon-intensive and we are looking at opportunities to get involved in financing these transitions from a debt side. We are also looking at emerging markets equities. ASEAN countries have recovered from Covid-19 much better than developed economies, mainly because of their fiscal policies, and we are bullish on India, Indonesia, Vietnam, Malaysia, and the Philippines.
[GSWF] Private Equity and Infrastructure are the largest contributors to your returns – where does your success lie?
[BCI] Our head of PE, Jim Pittman, has a great instinct for deals, which allows us to go direct. A recent deal had a multiple on invested capital of 6-7x. The team has great partnerships around the world, and with a very strong liquidity position PE is looking to do more directs. While Infrastructure is a lower-return business, Lincoln Webb has built a diversified portfolio with a long-term focus on stable income and capital appreciation, which consistently outperforms. When talking about returns, it is also important to talk about costs and according to CEM Benchmarking, we are running at 13 bps below the average of our Canadian peers, which translates to a savings of about CAD 300 mn a year.
[GSWF] OTPP is taking Cadillac Fairview in-house – do you expect QuadReal to stay as BCI’s independent RE arm?
[BCI] Yes, for sure. We set up QuadReal so that it could focus on managing our clients’ real estate equity and debt, and being independent of BCI allows the company to raise third-party capital. Dennis Lopez has done a phenomenal job for the past 7 years, taking it to AuM CAD 75 billion.
[GSWF] BCI was recently assessed with a 96% GSR – what can you tell us about Sustainability Investing at BCI?
[BCI] My predecessor Doug Pearce built a great foundation and culture around ESG, which we have continued and recently consolidated under Jennifer Coulson as our global head. Our goal is to capture opportunities from the transition to a low-carbon economy like our recent investments in solar and battery storage, while also reducing the carbon portfolio footprint of our investment portfolio. We have a strong network of relationships and influence and look to make a difference by acting as responsible stewards of capital. Our ownership rights allow us to engage directly with companies to improve ESG performance over time – if we simply sell who is going to buy the assets and what will they do with them?
[GSWF] You are one of the very few SOIs’ CEOs to be the CIO, too – how does it work in practice? How do you compare the past 9 years at BCI with your previous role as CEO of PSP?
[BCI] I love them both – when I joined PSP in 2003, I had 18 people and CAD 8 billion, so I had to build everything from scratch. My experience at BCI has been very different, as I inherited a great platform from Doug Pearce.
As per the CEO and CIO question, I played the same role at PSP, as I love looking at the investment world, and I am not prepared to give that up yet!
